What Does Pre-Qualified Mean?

Unless your are planning to pay with cash, getting pre-qualified is an important step in the home buying process and it's generally fairly simple.

You start by providing a financial institution or mortgage broker with a picture of your overall financial situation, including your employment history, income, assets, expenses and liabilities. After evaluating this information, the lender can give you a pretty good idea of the size mortgage (amount you can borrow) for which you may obtain.

Pre-qualification can often be done over the phone or on the internet and there is usually no cost involved. Loan pre-qualification does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.

Because it's a quick procedure and based only on the information you provide to the lender, your pre-qualified amount is not a sure thing. It's just the amount for which you might expect to be approved and the more thorough approval process.